Mr Fletcher has no military background and was shoulder-tapped by Mr Key who asked him to apply for the position.

Sir Bruce says he knew of one of the people who was shortlisted for the job by the State Services Commission, but "then at the 11th hour was told 'don’t come to an interview, we've already selected a candidate'".

Previous heads of the Government spy agency had military backgrounds which were important for the job, he says. He is concerned selection process did not take that into account.

"The State Services Commissioner is entrusted with running an apolitical selection process. From what I hear it appears that may not have happened and if that didn't happen then I find that disturbing."

Sir Bruce says morale at the GCSB was "as low as ever".

"That's not just because of this, the Kim Dotcom episode has had a significant impact on the bureau too."

Mr Key says State Services Commissioner Iain Rennie gave him a shortlist of four candidates for the job, but did not recommend any of them.

"He said 'we need to think and try and find another name'. I had a conversation with a couple of people, one of them was Ian Fletcher," Mr Key says.

"They went through the full process and were recommended by that board and we accepted. That's quite a normal process."

Mr Key defended Mr Fletcher's appointment.

"He isn't some bunny that's been pulled out of the hat. He's a very successful civil servant."

GCSB facts:

The GCSB is the most secret of all public institutions – the New Zealand arm of a global spy network.

Working with partners in America, Australia and the UK, it can intercept communications to an extraordinarily sophisticated degree.

In New Zealand, that eavesdropping is mostly done by the Waihopai spy base just outside Blenheim.

We know it’s there to protect our security, but we’re not told what else it gets up to.